The Gold Standard

The Gold standard was exactly that, a global standard based upon the value of gold. It allowed the economies of the world to have a point of reference with each and every economy that adopted the gold standard. While it once was synonymous with the economic strength of a nation and economy. It eventually crumbled like all things that man creates, its importance should not be undervalued but it was a standard that did not grow with the times and was left behind. The history of gold is an interesting one because it has no real intrinsic value with the exception of modern day computing with superconductors. That being said, gold has gone throughout human history as a reason for exploration, exploitation, and exasperation, a universal currency …show more content…
When importing the money would delate making their exports more viable in a global market, and the opposite happen with exporters, when exporting the currency inflated leading them to become less competitive than before. This self regulation of international trade allowed countries from all over the world to trade as equals. However, since we do not have the data for a highly competitive import export based economy like today with a gold standard, we can only make assumptions based upon the more limited trading ability of the past. But from what we do know, competitive traded markets are better for both parties. Making the equality from the gold standard actually hindering the production possibilities by having united trade rates. With a combination of cost of exporting and importing based upon technology at the time and the gold standard, international trade was gimped in terms of movement of goods and capital, but also of comparative advantage. In addition to the problems of having the Gold standard, with differing standards such as the silver standard also competing throughout the world, it it further lowers the trade ability between nations with different standards. When much of Europe adopted the gold standard, it made counties such as japan unable to trade trade effectively when they had the silver standard. This prevented truly free trade leading …show more content…
Inflation is significantly more common in fiat money than commodity or representative money, making the gold standard a natural way to fight off global inflation from happening. In the United States of America the US Penny is worth 1¢, the raw materials used to make each and every penny is approximately 1.7¢, making it incredibly inefficient to mint, for context the US Hay Penny or Half Penny was uncirculated in 1857 because it was deemed not valuable enough.The current value of a Hay Penny accounting for inflation would be about 10¢. from this president the US should not be even minting pennies, nickels or dimes. The reason that this is important is when money is backed by gold it cannot be less valuable than the material costs without extremely poor planing, the the material cost of the US penny costs them tens of millions of dollars more than the value of the coinage. Under the Gold standard no sort of inflation like this would happen. However, inflation might not always be bad for the economy. John Maynard Keynes saw slight inflation is actually good for the economy in the long run. Stating that if the prices and constantly rising, consumers are more willing to purchase goods than if they were constantly falling. This lack of consumption would then adversely effect the Aggregate demand, aggregate supply, as well as working producing non essential goods. Inflation promotes

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